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Sold Your Business and Ready to Retire?

Tim Owens

Updated: May 8, 2023

This blog goes over a scenario where a successful couple heading into retirement sold their business for $35 million. With the proceeds from the sale, the couple is unsure of where to allocate their money. Through an example using permanent life insurance, we illustrate how the couple can protect their estate, grow their wealth, while maintaining more than enough cash flow to use during their retirement.


Have you recently sold your business, or are you planning on selling your business prior to retirement? Are you planning on using the proceeds from the sale of your business to fund your retirement? Will you reinvest the money into the market in search of growth, sit on the money and watch the value decrease as inflation keeps deflating the dollar, or are you looking for something in between? If you are looking for something in between, here is a suggestion.


Consider the example of Michael (65) and Sarah (63). Michael and Sarah have recently sold their farm for $35,000,000. The couple now sit on a lot of cash, but they don’t want the value of their fortune to just evaporate as inflation rises. They prefer to play it safe, while still growing their wealth. Also, they want to pass on a considerable portion of their wealth to their heirs. Michael and Sarah decided to put $24,500,000 of their wealth into a second-to-die indexed universal life insurance policy over the span of 7 years, which allows them the downside protection of a floor (usually 0-2%), all while being able to catch stock market growth up to the announced cap (usually 8-12%). The policy death benefit will also pass on to their heirs tax-free upon their death. First, let’s see what their wealth would have looked like if the couple were passive and did no financial planning with the proceeds from the sale of their farm.



With $35 million in their savings account earning them a meager 0.10% annual return, their wealth barely grew. If they passed at ages 87 and 85 respectively, they would have had to pay over $9 million in transfer taxes, and their heirs would have been left with roughly $26.5 million. Now consider the difference the indexed universal life policy would make. It is quite astonishing.


First, since we reduced the amount of cash inside the estate below the $12,920,000 threshold, and we placed the life insurance policy outside of their estate, the couple do not owe any transfer taxes.



As you can see above, no transfer taxes are owed at any point should they pass. Now let’s look at the total picture. Keep in mind that the life insurance policy is showing a hypothetical growth of 5.74% annually.


Already in year 1, the death benefit of the life insurance policy exceeds $43,000,000, which is more than the estate would ever be worth if Michael and Sarah kept their cash in a savings account, and that’s not even taking into account transfer taxes. By the continuous funding of the policy, the death benefit by ages 87 and 85 respectively exceeds $78,000,000. Total wealth transferred to heirs (TAX-FREE) exceeds $89,000,000, a whopping $62,500,000 more than holding cash.


Bottom line, life insurance is a fantastic tool for the affluent to avoid large amounts of transfer taxes, while achieving protected growth.


Are you part of the affluent community and want strategic advice to preserve wealth?


Contact us today!


(559) 322-2230


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Securities offered through World Equity Group, Inc., member of FINRA and SIPC, a Registered Investment Adviser SKA Financial Group is not owned or controlled by World Equity Group, Inc. World Equity Group, Inc. does not provide tax or legal advice.

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